Five questions answered on the wholesale gas price fixing allegations

Regulators are investigating claims wholesale gas prices have been manipulated by major gas companies. We answer five questions on the gas pricing fiasco.

What exactly are the allegations being made? 

Major energy companies are being accused of manipulating the wholesale price of gas in the same way banks have manipulated libor. 

Energy companies buy gas at wholesale price then sell it onto to homes and businesses. On the 26 September gas companies are alleged to have made unrealistic bids at a time when data was being collected to set the wholesale price, they area alleged to have done this in order to suit their own situation rather than making a realistic bid.

Who discovered this alleged price-fixing? 

The whistle was blown by Seth Freedman, who worked at ICIS Heren, a financial information company that publishes energy price reports.

The Guardian report that Freeman flagged up a set of suspiciously low trades he believed were designed to depress ICIS Heron’s ‘day ahead’ price on the 28th September. One trader told Freeman in regards to the range of prices quoted on the 28th September:

There's a feeling among some people that somebody's taking the piss a bit on the day-ahead index.

ICIS Heren also told the BBC it had:

Detected some unusual trading activity on the British wholesale gas market on 28 September 2012, which it reported to energy regulator Ofgem in October.

Does wholesale price manipulation affect consumer prices?

Not directly as the price is being manipulated to be lowered. Wholesale gas price makes up an average of 45 per cent of consumers bills so lowering it shouldn’t affect bills. However, it is still a damaging discovery as Freeman has explained: 

There's certainly a link. They [the power companies] are telling you: Look, in order to make our profits and cover our costs and so on, we have to give a price to retail customers which reflects the cost to us.

But if you can't trust the market at a wholesale level, it becomes a crisis of confidence. People at retail level are just thinking, "I don't trust these companies" - and it needs to be scrutinised.

What has been the response of energy providers?

The big six energy providers have all released statements denying the claims. However, some of these ‘big six’ are currently being investigated by the Financial Services Authority and Ofgem. 

What has government said?

Energy Secretary Ed Davey will make a statement in the House of Commons today, but he has already said he is extremely concerned about the allegations. 

The Treasury Secretary, Greg Clark, spoke of the seriousness of the allegations to the BBC, saying:

Any scintilla of doubt that the participants cannot be trusted has a tremendously important effect.

I think it's very straightforward. When someone breaks the law, they should be punished, and when it's as serious as this, they should be punished very severely. And it's as true for stealing through financial manipulation as it is, frankly, for breaking and entering.

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Heidi Vella is a features writer for Nridigital.com

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To beat the Trump hype, we need a return to old-fashioned political virtues

If we want to resist the Trumpification of politics, what we need is restraint, duty and incorruptibility.

After the 1992 US presidential election, Alistair Cooke’s celebrated BBC radio series Letter from America struck a poignant note. Cooke described Bill Clinton’s worn jeans and checked wool shirt, contrasting them with George H W Bush’s buttoned-up Wasp manners and buttoned-down Ivy League shirts. Clinton’s style, Cooke argued, was a rebuke to a tired social and political establishment. His casualness was the new America.

Cooke, then 83, was honest enough to admit unease about this departure from the old, patrician modes and manners. “Along with the passing of George Bush,” he said, “we shall see, I fear, the passing of the blue blazer.” Cooke seemed right at the time. But don’t write off the blue blazer just yet. As ruling elites change, so does the appropriate counterpoint. To topple Bush’s stuffy golf club elites, Clinton picked up his saxophone, took off his tie and felt everyone’s pain. And now? The subtext of these turbulent months (the inevitable second question, prompted by “How do you beat Donald Trump?”) is: “What should ­tomorrow’s leaders, the leaders we crave, look and sound like?”

My conjecture is that, to beat Trump and his type – bling, shiny suits, dodgy deals – we should push towards centre stage an underestimated set of political virtues: restraint, duty and incorruptibility. If it weren’t for the gender associations, I would be tempted to call this quality gentlemanliness. Aside from personal virtue – signally lacking in the Clinton camp – how might decency inform public debate as it comes under attack from maverick showmen trained in the media circus? How can the middle ground regain its confidence?

First, level with the public. Maybe liberalism hasn’t failed so much as its messaging has failed. Instead of smashing the electorate over the head with the idea that everything is just great, make the case that not everything can be for the best in all possible worlds. As populists reach for empty slogans, a new space has opened up. Accept and exploit those asymmetries: more people are ready to hear uncomfortable truths than politicians imagine.

Kingsley Amis once argued that a writer’s voice should stay close to his speaking voice: not the same, but close. Adapting that idea, if politicians stayed closer in public debate to the truths that they articulate in casual conversation – some things are impossible; almost every policy creates a losing as well as a winning side; there really isn’t any money – they would be surprised how many people are ready to hear that not all problems can be evaporated into thin air. Stray too far from awkward truths and elections become about simple lies v tricksy lies.

Second, centrists do more harm than good when they rush to categorise dissenting opinion as not only wrong, but unacceptable. “Any suggestion that liberal values are not humanly universal,” as John Gray wrote in a recent NS essay, “will provoke spasms of righteous indignation.” Instead, we need to be more tolerant in our tolerance.

Third, stop pretending that everything desirable can be shoehorned into the “progressive” agenda. “I really care passionately about persevering with the common-sense middle ground and doing it quite well” is a problematic political sales pitch, but not for the reasons that are usually given. The gravest difficulty may come at the beginning, with the faux passion, rather than with the substance – public service and competence – underneath.

It is revealing that those closest to David Cameron expended so much energy trying to persuade us that he was not an updated version of Harold Macmillan. That is why the gay marriage reforms, though admirable, were accorded too much significance. Ah, Cameron was a natural crusader! But he paid a price for dressing up as a “radical” when greater challenges arrived. It weakened some of his strongest cards – calmness, perspective, proportion – just as politics was coarsening. Aren’t Tories supposed to understand the virtues of yesterday? In other words, as an electoral strategy to beat Trump (or Nigel Farage), I’d put up a Macmillan type over a Clinton type every time.

Fourth, cut ties with “messaging experts”. It’s a fraud. They teach that everything must be asserted with powerful conviction. Yet ideas unworthy of powerful conviction are best left shorn of them. The electorate has endured a communications version of crying wolf. As a result of the messaging game, when something genuinely important crops up, it sounds simply like the same old shtick.

Fifth, ditch the bogus quantification. Few things signal untrustworthiness more reliably than fake precision. Something shifted in me when George Osborne argued that Brexit would leave households £4,300 worse off. What, no decimal point? Voters understand uncertainty better than politicians imagine. Precise quantification used to sound professional. Now it sounds suspicious.

Finally, think about tone. Conventional wisdom holds that the mainstream must fight the Trumpian revolution on its own terms: a simple solution, memorably expressed, a guiding vision for the country or the world. If anyone has a good one to hand, I’m all for it. But what if – after decades of ­sophisticated argument and counterargument, as politics has solved the easy problems while parking the difficult or insoluble ones – we have reached a state of such evolved equilibrium that no such easy answer can exist?

Pretending otherwise is no longer a point of difference. It takes you towards the lowest common denominator. As Trump has shown, that is well-occupied territory. Perhaps wooing the angry mob is not the solution. Instead, the admirable and successful politician of the future will have to win back the support of moderate, sensible but disillusioned voters. 

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 01 December 2016 issue of the New Statesman, Age of outrage